Valuation of IP Rights, Intangible Assets & Goodwill
The course explains the situations in which intangible assets, goodwill or intellectual property valuations may be required together with the sources of guidance and practical valuation techniques available. It focuses on the relief-from-royalty and multi-period excess earnings methods.
To illustrate these methods, the afternoon is devoted to a full excel case study that participants work through on how to apply these methods in the context of performing intangible asset valuations for financial reporting purposes under either UK GAAP, FRS 102, or International Financial Reporting Standards, IFRS.
The morning session covers more general topics such as valuation guidance from the International Valuation Standards Council, IVSC, and other sources, together with a qualitative understanding of the different valuation approaches and methods available, and the topics and details that would be expected to be covered in a valuation report.
Delegates will need to bring a laptop with Excel software for the afternoon case study.
What You Will Learn
The morning session covers:
- When and why must intellectual property be valued?
- What is the International Valuation Standards Council, IVSC?
- What do IVS guidelines cover and how can you obtain them?
- What is The Appraisal Foundation, TAF?
- What guidance does the International Accounting Standards Board, IASB, provide on valuation?
- Where else might you find valuation guidance?
- What is meant by a basis of value - fair value, market value, equitable value etc?
- What are the circumstances under which IFRS requires intangible asset valuations?
- What are the circumstances under which FRS 102 requires intangible asset valuations?
- What is included in the value of a brand?
- Is it possible to value the relationships a company has with its customers?
- Intangible asset valuation approaches and methods and when they are used
- Cost, market and income approaches
- Relief from royalty method
- Multi-period excess earnings method
- With and without (premium profits) method
- Replacement cost method
- How is the discount rate measured for intangible assets?
- What would you expect to see in a valuation report?
- How could you challenge a report whether for audit, expert witness purposes or other purposes?
The afternoon session and case study covers:
- Estimating the value of intangible assets arising following a business combination
- How is the cost of goodwill derived?
- Interplay between IASB, IVSC and TAF guidance
- What differences are there between IFRS and FRS 102?
- More details on the relief from royalty method including how to source royalty rates
- More details on the multi-period excess earnings method
- Overview of measurement of weighted average cost of capital, WACC
- Measuring the internal rate of return, IRR, implicit in a transaction
- What is the significance of the IRR?
- Estimating a suitable discount rate for the different intangible assets
- Identifying the recognisable intangible assets arising in a business combination
- Measuring intangible asset fair value using relief from royalty method
- Measuring intangible asset fair value using the multi-period excess earnings method
- What is meant by customer attrition?
- What is meant by a contributory asset charge?
- Drawing together conclusions - measuring residual goodwill
- Review of discount rates applied using a weighted average return on assets, WARA, check
- Participants will be given a suggested solution and have time to ask questions to ensure they understand the methods used
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